There was a time when banks happily lent 100% of the property amount to borrowers. However, those days are gone. Today, most lenders expect borrowers to provide 20% deposit upfront to be applicable for a home loan. And thanks to this, many Australians who can service their home loan are still unable to borrow because saving the Big D is no mean feat – on an average, it can take a household up to 3 years to save the 20% deposit for a $500,000 property!


However, all is not lost as many lenders allow you to take high LVR loans (or low deposit loans) if you are backed by a parental guarantee or agree to pay Lenders Mortgage Insurance (LMI).

Loan to Value Ratio or LVR refers to the ratio of the amount you are borrowing to the value of the property, expressed as a percentage. Thus, higher the LVR, higher the risk to lenders in the case of any payment default. This is the reason lenders are more conservative when it comes to high LVR loans.

Are you struggling to save the coveted 20% deposit? The good news is you can still borrow with as low as 5% deposit in your kitty. We tell you how:

1. Ask your parents to back you – It is possible to borrow as much as 100% of the property’s value if your home loan application is backed by your parents. In case you are unable to save up for the deposit, your parents can use their own property to secure your home loan by providing a parental guarantee. This means the lender can attach your parent’s property in case you default on your home loan bringing down the risk proposition for the lenders but landing more responsibility on your shoulders.

2. Lenders Mortgage Insurance (LMI) – Many lenders still offer 95% LVR loans if you have a squeaky clean credit file, proof of steady income and at least 3 months of genuine savings. However, high LVR loans attract LMI but it is possible to compare weekly home loan deals and get lower interest rates or LMI discounts on high LVR loans.

3. Use a mortgage broker – Using a mortgage broker can save you tons of money and time and help you find the best home loans tailored to your financial condition. In cases of low deposit or bad debt, mortgage brokers can especially be of great use as they can present your case objectively to lenders, increasing the chances of approval. Expert brokers at HashChing answer all your home loan queries online, for free.

4. Approach the right lender – Most lenders use an automated system to assess your home loan application. This means an application for a high LVR loan may get rejected even before it reaches someone at the bank. It is, thus, a good idea to approach lenders who still assess home loan applications manually on merit rather than subjecting them to automated screening. A mortgage broker can guide you in the right direction. In fact, while lenders are wary of low deposits, as the mortgage market turns more and more competitive, many lenders are now offering high LVR loans at competitive rates. Coupled with a high credit score, you may also be eligible for special LMI discounts or waiver.

At HashChing, we understand that buying a home is a major financial decision and we help you buy your home by letting you compare broker pre-negotiated rates for the most competitive home loan deals in the market.

By Vidhu Bajaj



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